StudyCorgi Business & Economics

Supply Chain Integration in the Oil and Gas Industry

The First Article

Critical Analysis of the Article

The article by Ahmad, Brito, Rezaei, and Tavasszy (2017) examines factors that influence the sustainability of the supply chain of companies in the oil and gas industry. Given that the oil and gas industry deals with the non-renewable form of energy that has negative effects on the environment, sustainability practices of the supply chain are critical in alleviating them. Ahmad et al. (2017) propose an integrated framework that incorporates the triple bottom line (TBL) approach to sustainability of the supply chain in the oil and gas industry because it offers a comprehensive solution. The TBL approach focuses on social, environmental, and economic dimensions of sustainability. In this view, the article outlines the framework, which elucidates the contextual factors and their interrelationships in influencing the sustainability of the supply chain. The upstream operations, such as exploration, production, and refining, and downstream processes, for instance, transportation, storage, package, distribution, and sale, determine the sustainability of the supply chain.

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The conceptual framework defines the external and internal factors that influence the sustainable management of the supply chain. As the oil and gas industry experiences intense sustainability pressure, the external environment has a marked influence on its operations. Shareholder pressure, competition, economic stability, regulations, political stability, and volatile markets are the external factors in the business environment that influence the achievement of the TBL in the supply chain (Ahmad et al., 2017). The findings of the article provided a comprehensive way of promoting the sustainability of the supply chain in the oil and gas industry. According to the findings, the management of logistics, suppliers, production processes, and product stewardship offers an integrative framework for a sustainable supply chain (Ahmad et al., 2017). As aspects of the supply chain, the interactions of logistics, suppliers, production process, and product stewardship enhance the sustainability of the supply chain. Evidently, contextual factors in the internal and external environment of a company contribute to the sustainability of the supply chain.

Connection and Importance to Operations Management

The article relates to operations management in the oil and gas industry for it examines how an integrative framework would improve the sustainability of the supply chain. Moreover, the article is important to operations management because it stipulates four ways an organization can improve the sustainability of its supply chain. To develop an integrative framework, organizations in the oil and gas industry ought to manage logistics, suppliers, production processes, and product stewardship (Ahmed et al., 2017). Logistics management entails the adoption of green logistics through the collaboration of companies and minimization of risks that are prone to unstable jurisdictions.

The management of suppliers is essential to ensure that they satisfy the social, environmental, and economic dimensions of the TBL. In the aspect of suppliers, a company should adhere to labor laws, consider employee welfare, participate in trade fares, undertake corporate social responsibility, protect the environment, and generate substantial profits to promote sustainability of the supply chain. The findings of the production process require a company to use green strategies of waste reduction, utilize renewable energy, and differentiate its products to meet the diverse needs of customers. Product stewardship is an important aspect of the supply chain because it involves monitoring and assessment of products during production, transport, storage, distribution, sale, and consumption (Ahmad et al., 2017). Thus, the integration of logistics, suppliers, and production processes of the supply chain promotes product stewardship.

Recommended Applications

The article provides novel findings that are important to the improvement of the supply chain management in Abu Dhabi National Oil Company (ADNOC). Prajogo, Oke, and Olhager (2016) argue that the integration of the supply chain enhances the competitiveness of organizations. The findings can improve the quality, delivery, cost, and safety of the supply chain in the oil and gas industry. Logistics management is a recommendation of the article that aims to reduce costs and improve safety. Collaboration between ADNOC and other companies would reduce costs due to cost-sharing and economies of scale. Since ADNOC operate in risky markets, controlled logistics and the adoption of green strategies would improve the safety of products. The management of suppliers in the supply chain would enable ADNOC to reduce costs, improve the quality of products, and enhance the timely delivery of products. The recruitment of suppliers that comply with the prevailing regulations of labor, environmental protection, safety precautions, and good business practices would prevent the occurrence of accidents (Ahmad et al., 2018). Moreover, the recruitment of established suppliers is critical in improving quality and enhancing the timely delivery of products.

As the production process determines the quality of products, ADNOC should adopt green strategies and differentiate products. Green strategies such as waste management and the use of a renewable form of energy would enable ADNOC to provide quality and safe products. Differentiation of the product allows ADNOC to create quality products that meet diverse customers and markets. The implementation of product stewardship has a positive impact on the quality, delivery time, cost, and safety of products. Essentially, product stewardship permits ADNOC to monitor and assess its products from the production to consumption and applies feedback information in the creation of superior products and improvement of the supply chain.

The Second Article

Critical Analysis of the Article

The article by Shinkevich, Farrakhova, Shinkevich, Pavlova, and Vyukov (2016) explores the application of an integrated management model (IM) to the supply chain (SC) management of petro-products to increase customer value, enhance the sales process, and reduce operational costs. The model entails the integration of material, fiscal, service, and knowledge into internal or inter-firm logistics. The study involved a systematization of the drivers of integrated management of petro-products SC’s in Tatarstan based on industry data. The results associated increases in the market share, profitability, and turnover of integrated value chains.

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Integrated SCs were also shown to add customer value. The use of the IM model was associated with lower costs, improved productivity, and better product quality (Shinkevich et al., 2016). Thus, IM leads to the functional integration of value chain activities, including the processing and selling of petroleum products, across different suppliers. Using this model, Tatarstan’s petrochemical complex was able to supply Russia with about 17% of processed oil products, including diesel and tires, and accounts for 6.5% of shipment by volume of Russian producers and refineries (Shinkevich et al., 2016). As a result, its diesel and oil exports grew by 14.2% and 19.4%, respectively, in 2013 compared to 2012 (Shinkevich et al., 2016). Thus, geographical integration, i.e., creating a single SC or engaging in joint activities from deep hydrocarbon processing to marketing can enhance the efficiency of partner firms.

IM was also associated with reduced ambiguity in the SCs. It streamlines critical steps in the deep processing of oil to provide quality at a lower cost. The elements of a general SC in the petrochemical industry include research, extraction, processing (primary and secondary), marketing, and consumer (Shinkevich et al., 2016). Integrated management of SCs among Tatarstan’s enterprises has led to increased industrial production, export volumes, higher producer price index, and profitability growth (11.7% in 2013 vs. 0.5% in 2012).

Connection and Importance to Operations Management

The article has theoretical significance and conceptual links to operations management. Integrated supply chains in the petroleum industry have been shown to yield competitive gains for Tatarstan’s petrochemical complex, including reduced costs (Shinkevich et al., 2016). Oil firms can adopt IM in inventory planning to reduce production costs. For example, due to supply chain integration Tatarstan’s enterprises produce 6.5% of the Russian firms’ petroleum shipments – mainly tires, heating fuel, and diesel – to Russia (Shinkevich et al., 2016). Integrated SC management allows these organizations to deliver low-cost oil products for export.

Transportation/logistics efficiency is another area of operations management tackled by the article. It helps reduce the delivery time of shipments. The article shows that the export share of the firms forming a part of the complex grew by up to 8% for oil due to supply management (Shinkevich et al., 2016). An intermodal transportation network that is transnational helps decrease the time required to deliver shipments to Russian regions and reduce costs at train terminals. Efficient logistics also ensure the safety of the oil products shipped to foreign depots and piped to homes.

At every phase of integrated supply chain management, specific operations are done that require interactions with different service providers. For instance, quality seismic and geophysical studies, extraction, oil refining, and industrial processing involve the integration of financial resources, skills, and information. The premise is that integrated SC management supports efficient supply chain planning to remove capacity constraints (Gunasekaran, Subramanian, & Rahman, 2017). Tatarstan’s enterprise complex worked with service providers in secondary processing activities, such as deepening, refining, and alkylation, among others (Shinkevich et al., 2016). This integrated approach ensured the quality of products for the international market and the safety of oil processing.

Recommended Applications

The article’s ideas have significance and practical applications to the use of integrated SC management in the oil processing industry. ADNOC could utilize the integrated management model in its supply chains. This approach would cut costs related to inefficiencies or inadequate drilling or processing capacity. For example, ADNOC could engage in the joint processing of crude oil with local firms to improve their efficiency and cut costs. Complete integration would require the company to establish a single supply chain and sharing information, R&D, and management functions.

Integrated supply chain management could also be applied in the distribution of its petroleum products. Downstream outlets and independent contractors experienced in different geographical markers could be involved in distributing petro-products to these areas. Through mergers and local partnerships, ADNOC can build an efficient distribution system in the Gulf region. Further, using integrated SCs that include cross-border third-party logistics (3PL) providers could reduce transportation costs, optimize inventory flows, and ensure timely delivery. The decoupling of processing from transportation requires coordinated planning to realize the benefit of cost minimization.

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The Third Article

Critical Analysis of the Article

Since the supply chain encompasses series of operations from production to consumption of products, the integration of these operations is critical. In their article, Ebrahimi, Koh, Genovese, and Kumar (2018) demonstrated the role of supply chain integration (SCI) strategies and organizational structure (OS) in improving operations management and boosting overall performance. Essentially, the interaction between SCI strategies and OS dimensions mediate operations management and organizational performance. Ebrahimi et al. (2018) sampled 181 companies in the oil and gas industry and applied the contingency approach in determining the relationship between the supply chain strategies and organizational structure dimensions. The SCI strategies comprised customers, internal operations, and suppliers, whereas the OS dimensions constituted formalization, centralization, and hierarchical relationships. The structural equation modeling was used to establish the nature of relationships and causal links between SCI strategies and OS dimensions.

The analysis of findings provides important information about the supply chain and operations management in the oil and gas industry. The findings of the article show that OS dimensions, namely, formalization, centralization, and hierarchical relationships, have negative impacts on the performance of organizations (Ebrahimi et al., 2018). These findings imply that the nature of OS dimensions determines the operational performance of an organization. Further analysis of relationships revealed that SCI strategies mediate the negative effect of OS dimensions on the performance organizations (Ebrahimi et al. 2018). Therefore, the findings of the study recommend the application of SCI in alleviating the negative impacts of OS on the performance of organizations in the oil and gas industry.

Connection and Importance to Operations Management

The article connects to operations management since it demonstrates how OS and SCI interact and influences the performance of organizations in the oil and gas industry. OS and SCI are important factors in operations management for their interactions cover diverse aspects of the supply chain. The formalization, centralization, and hierarchical relationships are OS dimensions, which describe the nature of an organization. Highly formalized, centralized, and hierarchical forms of operations management have negative impacts on organizational performance because it reduces the flexibility and innovative ability of employees. In essence, employees perform their duties and responsibilities by adhering to strict rules, guidelines, protocols, and hierarchies. Thus, dimensions of OS fall in the operations management for organizations use them in improving their performance.

The aspects of SCI are not only important to the supply chain but also operations management. The article examined how the integration of customers, internal operations, and suppliers into the supply chain mediates the effect of OS on organizational performance (Ebrahimi et al., 2018). The interaction between customers, internal operations, and suppliers promote coordination of processes in the supply chain. Fundamentally, integration empowers organizations to streamline operations and activities of the supply chain to provide optimal synergy (Lee, Seo, & Dinwoodie, 2016). Thus, the process of integration is an aspect of operations management aimed at improving coordination and synergy of operations in the supply chain.

Recommended Application

As the findings demonstrated that OS and SCI have significant effects on the performance of organizations, ADNOC ought to apply them in managing its supply chain and obtain optimal performance. Reduction of the extent of OS would enable ADNOC to improve lead-time in logistics, enhance the quality of products, and reduce costs. An organization that with low levels of formalization, centralization, and hierarchy perform well because employees, the management, and customers interact freely, resulting in customer and employee satisfaction (Ebrahimi et al., 2018). In this view, employees come up with innovative strategies to advance the quality of products, increase their performance in logistics, and reduce losses associated with poor motivation. In the aspect of SCI, ADNOC should ensure that there is effective integration of customers, suppliers, and internal operations. Ebrahimi et al. (2018) assert that the interactions of suppliers, customers, and internal operations improve lead-time, boost the quality of products, and reduce costs. A seamless interaction between customers and suppliers allows organizations to get vital information essential in improving internal operations and processes of the supply chain.

References

Ahmad, N. K. W., de Brito, M. P., Rezaei, J., & Tavasszy, L. A. (2017). An integrative framework for sustainable supply chain management practices in the oil and gas industry. Journal of Environmental Planning and Management, 60(4), 577-601. Web.

Ebrahimi, S. M., Koh, S. C. L., Genovese, A., & Kumar, N. (2018). Structure-integration relationships in oil and gas supply chains. International Journal of Operations and Production Management, 38(2), 424-445. Web.

Gunasekaran, A., Subramanian, N., & Rahman, S. (2017). Improving supply chain performance through management capabilities. Production Planning & Control, 28(6), 473-477, Web.

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Lee, H., Seo, Y., & Dinwoodie, J. (2016). Supply chain integration and logistics performance: The role of supply chain dynamism. The International Journal of Logistics Management, 27 (3), 668-685. Web.

Prajogo, D.I., Oke, A., & Olhager, J. (2016). Supply chain processes: Linking supply logistics integration, supply performance, lean processes and competitive performance. International Journal of Operations & Production Management, 36(2), 220-238. Web.

Shinkevich, A. I., Farrakhova, A. A., Shinkevich, M. V., Pavlova, A. V., & Vyukov, M. G. (2016). Integrated management flows in petroleum products supply chains in the field of hydrocarbons deep processing. International Journal of Economics and Financial Issues, 6(2), 523-528. Web.

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StudyCorgi. (2020, December 13). Supply Chain Integration in the Oil and Gas Industry. Retrieved from https://studycorgi.com/supply-chain-integration-in-the-oil-and-gas-industry/

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"Supply Chain Integration in the Oil and Gas Industry." StudyCorgi, 13 Dec. 2020, studycorgi.com/supply-chain-integration-in-the-oil-and-gas-industry/.

1. StudyCorgi. "Supply Chain Integration in the Oil and Gas Industry." December 13, 2020. https://studycorgi.com/supply-chain-integration-in-the-oil-and-gas-industry/.


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StudyCorgi. "Supply Chain Integration in the Oil and Gas Industry." December 13, 2020. https://studycorgi.com/supply-chain-integration-in-the-oil-and-gas-industry/.

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StudyCorgi. 2020. "Supply Chain Integration in the Oil and Gas Industry." December 13, 2020. https://studycorgi.com/supply-chain-integration-in-the-oil-and-gas-industry/.

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StudyCorgi. (2020) 'Supply Chain Integration in the Oil and Gas Industry'. 13 December.

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